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He actually touched on the answer of where it's all going: litigation, and the related indirect costs. (Sorry for the long quote, but can't clip much out.) >Fifth, might the increased regulatory complexity happen not through literal regulations, but through fear of lawsuits? That is, might institutions add extra layers of administration and expense not because they’re forced to, but because they fear being sued if they don’t and then something goes wrong? >I see this all the time in medicine. A patient goes to the hospital with a heart attack. While he’s recovering, he tells his doctor that he’s really upset about all of this. Any normal person would say “You had a heart attack, of course you’re upset, get over it.” But if his doctor says this, and then a year later he commits suicide for some unrelated reason, his family can sue the doctor for “not picking up the warning signs” and win several million dollars. So now the doctor consults a psychiatrist, who does an hour-long evaluation, charges the insurance company $500, and determines using her immense clinical expertise that the patient is upset because he just had a heart attack. That is, a big fraction of medicine is "we have to cover this base for fear of being sued", and it's hard to look at external metrics to evaluate "this was a legit cost, vital to the patient's care" vs "this was just covering bases". I would say that such "legal insurance" is subject to "Knightian uncertainty". It's not like "oh, 5% will get sued a year, which costs $50k each". There is wild variation in what juries award, what goes to trial etc. Needless to say, that forces the insurance/prevention cost up very high, even when it doesn't correspond to a jury verdict. Think about the cost to insure a satellite launch failure vs first contact with aliens. Europe and Asia lack this cost because many of these incidents don't have to go to trial. "Oh, the operation botched your life? Boom, the social insurance gives you this nice predictable payout." Nothing lost in the legal black hold of jackpot justice. |